As the power generation landscape changes, the main battle is primarily between gas and coal generation.
In the coal-gas battle, the current fundamentals are pointing to a bearish outcome.
Mining economics improved week on week.
Henry Hub was down while other markets were flat or slightly up.
In this week’s report, we focus on a particular layer of the power markets: the gas-coal generation competition.
The landscape of power generation is changing as we see less coal and more gas and renewables. The renewables generation group is still small but is the fastest growing group over the past decade. Nuclear generation will reach its maximum capacity since it is a large sunk cost. In contrast, renewable generation operates whenever the wind blows and the sun shines. The game is for the remaining load, with the battle primarily between gas and coal generation. There are multiple factors involved in this contest: if load is high, the ratio of gas over coal can get very high, as the amount of coal is limited since the coal fleet continues to decline. Since 2020, the coal fleet has been reduced by nearly 30 GW and is now down to 208 GW.
In the coal-gas battle, the current fundamentals are pointing to a bearish outcome. However, mother nature always wins, and a cold shock to North America could wipe out this bearish factor. These types of extremes do merit some hedging to ensure have business continuity. BitOoda is well versed in variables of both the power markets and your mining business, and can help you develop effective hedging strategies.
• The gas-coal ratio this year has consistently been higher than the previous years.
• This means coal generators have been outcompeted by gas units.
• Looking at the price of power in PJM over time, the gas-coal ratio should be seen in the context of the fact that coal prices are higher in 2022-2023 than in 2020-2021, leading to the erosion of coal market share.
• Looking at U.S. Energy Information Administration (EIA) data for coal cost delivery: July 2023 shows a record fleet price of $2.48/mmtbu.
• A rough dispatch cost for a coal plant using that price would be around $30/MWh considering the emissions costs and other variable cost factors.
• In contrast, gas prices in July averaged $2.97/mmbtu – given the better efficiency and lower variable cost, the dispatch would likely be under $30/MWh.
• Unfortunately for coal, the fuel procurement process is not just-in-time: coal plants have to procure at least a year out, so there are likely coal plants starting to have more coal on site than they can handle.
• As seen below, coal stocks are at high levels relative to the past few years – this includes having a smaller coal capacity by 29 GW compared to 2020.
• This would put more pressure on power prices IF they would have to run outside economics to reduce coal stocks.
• A mild winter would likely result in lower prices with coal stocks at those high levels.
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David Bellman
Power & Carbon Research
dbellman@bitooda.io
BTC Price 7 day Avg: $28,678
Hashrate7 day Avg: 439 EH/s
PJM Cal 24: 48 $/MWh
NYISO Cal 24: 53 $/MWh
ERCOT Cal 24: 52 $/MWh
CAISO Cal 24: 70 $/MWh
In this week’s report, we focus on a particular layer of the power markets: the gas-coal generation competition.
The landscape of power generation is changing as we see less coal and more gas and renewables. The renewables generation group is still small but is the fastest growing group over the past decade. Nuclear generation will reach its maximum capacity since it is a large sunk cost. In contrast, renewable generation operates whenever the wind blows and the sun shines. The game is for the remaining load, with the battle primarily between gas and coal generation. There are multiple factors involved in this contest: if load is high, the ratio of gas over coal can get very high, as the amount of coal is limited since the coal fleet continues to decline. Since 2020, the coal fleet has been reduced by nearly 30 GW and is now down to 208 GW.
In the coal-gas battle, the current fundamentals are pointing to a bearish outcome. However, mother nature always wins, and a cold shock to North America could wipe out this bearish factor. These types of extremes do merit some hedging to ensure have business continuity. BitOoda is well versed in variables of both the power markets and your mining business, and can help you develop effective hedging strategies.
Purpose
This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.
Analyst Certification
David Bellman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Conflicts of Interest
This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.
General Disclosures
Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or throughhttp://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such.BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.
All derivatives brokerage is conducted byOoda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.
BitOoda Technologies, LLC is a member of FINRA.
“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.
Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.
David Bellman
Power & Carbon Research
dbellman@bitooda.io
BTC Price 7 day Avg: $28,678
Hashrate7 day Avg: 439 EH/s
PJM Cal 24: 48 $/MWh
NYISO Cal 24: 53 $/MWh
ERCOT Cal 24: 52 $/MWh
CAISO Cal 24: 70 $/MWh
In this week’s report, we focus on a particular layer of the power markets: the gas-coal generation competition.
The landscape of power generation is changing as we see less coal and more gas and renewables. The renewables generation group is still small but is the fastest growing group over the past decade. Nuclear generation will reach its maximum capacity since it is a large sunk cost. In contrast, renewable generation operates whenever the wind blows and the sun shines. The game is for the remaining load, with the battle primarily between gas and coal generation. There are multiple factors involved in this contest: if load is high, the ratio of gas over coal can get very high, as the amount of coal is limited since the coal fleet continues to decline. Since 2020, the coal fleet has been reduced by nearly 30 GW and is now down to 208 GW.
In the coal-gas battle, the current fundamentals are pointing to a bearish outcome. However, mother nature always wins, and a cold shock to North America could wipe out this bearish factor. These types of extremes do merit some hedging to ensure have business continuity. BitOoda is well versed in variables of both the power markets and your mining business, and can help you develop effective hedging strategies.
Purpose
This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.
Analyst Certification
David Bellman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Conflicts of Interest
This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.
General Disclosures
Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or throughhttp://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such.BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.
All derivatives brokerage is conducted byOoda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.
BitOoda Technologies, LLC is a member of FINRA.
“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.
Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.